When Will That Bailout Money Trickle Down Exactly?

By Kelly Spors

A small Chicago windows manufacturer that laid off all its workers after Bank of America cut off funding has become center stage for a contentious issue: Why are banks severing the lifelines of small businesses despite the billions they received from the bailout?

Last week, Republic Windows and Doors of Chicago received notice from Bank of America that it could no longer finance the company. Management abruptly informed its 300-some workers they were all being laid off. The workers – angry over their fate – staged a sit-in and drew so much media attention that politicians stepped in to help. Illinois Gov. Rod Blagojevich (who was, coincidentally, arrested this morning on federal corruption charges) yesterday requested that all state agencies stop working with Bank of America in protest. Bank of America told WSJ it was “reaching out” to Republic to try and resolve the issue.

The Illinois debacle is a high-profile example of the growing backlash against banks for continuing to deny credit to many small businesses despite the bountiful financial rescue they all received. (Bank of America was the recipient of $25 billion in bailout dollars.) Business owners assumed — or hoped — the bundles of money handed to banks from the controversial $700 billion bailout package passed by Congress in October would free them up to once again lend money to businesses as usual. But that doesn’t seem to be happening. Why not?

“Simply put, banks are hoarding cash, and the influx of government money won’t necessarily change their plans,” wrote BusinessWeek bureau chief Dean Foust recently. Citigroup Chief Financial Officer Gary Crittenden told analysts in October that the bank wasn’t going to treat the government money “like a windfall” and planned to continue with measures to make the company “fit” again – which presumably meant not lending money as freely as before.

Still, many small businesses are getting hurt by the credit crunch despite the government’s bailout. I continue to hear stories from frustrated and angry business owners about their inability to borrow or surprise notices from creditors about lines being slashed. Some of these businesses have decades of successful operations — not exactly fly-by-night startups scraping to get by.

Surely banks need to be wise about whom they lend money to, but the entire justification of this bailout package was to unfreeze credit and help businesses access capital again. Many business owners would appreciate some clarification from banks on how they are using their newfound dollars to do that.

Have you seen lending ease at all in recent weeks? Should banks continue to be more cautious about whom they lend to, despite the bailout money they received?

"One can’t help but wonder, what’s in Richard Fairbanks Wallet? Your family’s money? It seems Richard Fairbanks and his “army” thinks they can take what they want, when they want, from whomever they want without consequence. Maybe that’s why Fairbanks has been in the top 5 the highest compensated CEO’s for the last 5 years earning over half of a BILLION DOLLARS!!!
I believe in “free markets” too which is why I went in business for myself. However, unlike Capital One, I honor my commitments and obligations. Does earning a multi-million dollar a year paycheck require taking advantage of the very people that helped get you there just because you can?"

OK. Now take this and spread it around every industry and multiply by a large number and you now have a good snapshot of where they stand and where you stand in America: A completely degenerate and unrepentant aristocracy is where they stand. You are a cow in a field ready to be milked or slaughtered.

You probably believe in Adam Smith and other decent people like him. They just use him for cover.

6:39 pm April 17, 2009

Tom From Florida wrote :

The bailout money will never trickle down to where it should be. I will give you a good example of what just happened to me. I have 5 accounts with bank of America, all of which I hold large balances. My primary account rarely gets below $40k, I own a small insurance agency and employ 10 people, my wife works in medicine, we are not rich, nor are we poor. But I assure you that we work our asses off for every penny we have. Now as I said I own an insurance agency, as most of you know a large part of my operating expense is marketing. I used to buy leads from other companies and got tired of getting ripped off. So last year my business partner and I decided we would form another corporation and start a lead company solely for our use. When we opened the company we went to bank of America and opened another business account. In doing so we were told that we had to also get a credit card in order to open the account, we didn't need one but they said it was necessary to open the account. Well we never have never used the card and just deposited the amount need for our out going checks in the account and kept the required amount to avoid their bullshit maintenance fees. Well here we are a year later, business is down but still fairly good. Our returns on our direct mail was down partly due to the economy and partly due to our crappy postal service. So we decided we would run a TV ad and we also decided we would use this credit card rather than tapping into our own money and simply pay it off every month. Well when i called bank of America I was told they had just can canceled it due to us not using it. I asked if they could reopen it and they said they would send a request to do so. Three days later I call and find out they declined it, now keep in mind i have 5 accounts with them and have close to 100k in their bank and they also hold my mortgage. I have never been late on a bill, I have never bounced a check and both me and my partner have credit scores over 800. Bank of America is a disgrace to our country and the people who pay taxes, our wonderful Obama gave them 20 billion dollars to stimulate small business loans. I didn't even apply for a loan, I just wanted to use a credit card that they forced on me to begin with. I am fed up with he united states of America and our political thieves and CEO's. My wife and I are considering moving to another country, people say their government is corrupt and unstable. Well I must say they are no more corrupt and unstable than the current United States government. Well I have said enough, if the people of the united states stand together maybe there is hope. But we all know that will never happen, good luck fellow Americans, we're in for a ride, you better hold on tight! It may be the last one you will ever take!

3:40 am December 24, 2008

spartybrutus wrote :

Adam, yep the banks should return the tax $ to the govt as they are not lending it.

Good luck with your business as USED car dealers should survive. NEW car dealers probably should thin out a bit...

4:09 pm December 19, 2008

Adam Berlin wrote :

My name is Adam Berlin; I own and operate Sports and Imports. We are an independent auto dealership located in Asbury Park, New Jersey (Neptune TWSP).

In light of the recent “bail out’ appropriation to Capital One, I felt obligated to share the details of my situation to help prevent Capital One Bank from similarly mistreating other qualified borrowers and to ensure Capital One Bank is held accountable for their actions.

Capital One Bank has wrongfully refused to honor a floor plan financing agreement that was renewed and signed on July 1, 2008 for a term of 1 year. Specifically, the Credit and Security Agreement (CSA) entered into in this matter provides for a (1) one year term, which was not scheduled to expire until July 1, 2009, “unless sooner terminated pursuant to a default”. Their termination was expressly based on a “business decision” without relevance to any of the terms and conditions of the CSA. This is the type of corrupt, deceitful and greedy corporate behavior that I thought the government was trying to prevent.

On August 14, 2008 Capital One announced they would end financing of auto dealers' inventories (floor planning) in New Jersey and New York. They gave dealers a very unrealistic time frame, 45 days to find another bank. Oddly they said they would continue to finance dealers in Texas and Louisiana.

If they are breaking month old contracts to existing creditworthy customers with a proven track record of servicing debt for 6.5 years, you can bet they certainly aren’t making new loans to qualified borrowers. The government’s plan to inject money to encourage lending is not achieving the desired results, quite the opposite.

My company has been in business for 6.5 years. In the last 3 years alone my company has collected $1,500,000 from consumers in sales tax for our government and community. We have sold over 5,000 vehicles totaling $60,000,000 in that time frame (some deals we sold out of state and we paid other states sales tax).

Five month ago we employed 32 people, now we are down to just 10. Eighteen months ago we consolidated 2 locations in Tinton Falls relocated to a larger better equipped facility on Asbury Avenue. After massive renovations and $400,000 later we resurrected the former Cadillac building into a new landmark in Monmouth County (once owned by the Rockefellers’ from the 1950’s).

We have enjoyed a 6.5 year relationship with Capital One Bank (through 3 bank mergers without interruption). Throughout our entire 6.5 years we had a very successful relationship together with a flawless track record of responsibility and on time payments. We have (and still maintain) perfect credit, both personally and professionally.
As an owner and creator, with tremendous pride and ethics, I have also been faced with many difficult “business decisions” over our 6.5 year history. That being said, I can respect and appreciate any “business decision” that a company makes if they feel it’s in their best interest.

The irresponsibility of Capital One, however, is not just unfair and unethical…..but their actions are severely damaging consumers and small business’ ability to borrow with complete disregard for the governments ‘bail out” plan.

If they wanted to end our relationship and get out of the “floor plan business” that’s their decision...I could accept it and move on. Conversely, I’d expect Capital One Bank, as a “hugely successful business” to honor their decision to renew my 1 year CSA (Credit and Security Agreement) that was signed on July 1, 2008.

When I was told by Capital One’s representative Rich Antanacii only a month after resigning a 1 year agreement I was “shocked” to say the least. At the time I didn’t fully appreciate the magnitude of his wrong doing. The CSA was not terminable at will. It can only be terminated upon the expiration of its term (i.e. on July 1, 2009) or upon the event of a default. Incredibly, Rich Antanacii unilaterally terminated the CSA by his letter dated August 14, 2008. This letter was not based upon a default; none existed for this to happen.

Stated bluntly, IT’S ABSURD AND ACTIONABLE!!

In addition to Capital One’s wrongfully inducing me into signing the CSA on July 1, 2008, Capital One also forced me to close a floor plan line maintained separately with Manheim Financial Services. In doing so, only 13 months earlier reflects Capital One’s complete disregard for my company’s business interest. Manheim has since informed me that re-opening my account with them is no longer an option.

Needless to say finding another lender in the current environment is also impossible. The inability to secure another floor plan lender has had a devastating mental and financial impact on our company and if someone doesn’t step in immediately it will most likely result in Sports and Imports closing its doors with even more job loss.
To add injury to insult, I learned that on December 4, 2008 Capital One definitively announced that will acquire Chevy Chase Bank in MD. Under the agreement, Capital One will purchase Chevy Chase for $445 million in cash and 2.56 million Capital One shares.

So, Capital One gets $3.56 billion in bailout money and buys a bank for $520 million. Without looking at a financial statement or being an analyst I think it’s pretty clear one of two things are going on: either Capital One used our hard earned tax dollars to fund this acquisition or they used their own money in which case why would the government give them our money?
I don’t see any benefit to our economy; consolidation usually doesn’t create jobs it ends them.

After reading about the acquisition and being faced with an imminent collapse of my own company it became clear…it seems to be a pattern for Capital One. They intentionally are mis-leading the government (or at least the public) by borrowing money to fund an acquisition much like they mislead me in signing a 1 year agreement on July 1, 2008. By the admissions of Capital Ones own employees..past and present….I recently learned…contrary to what they had been telling, they had no intentions of staying in the floor plan business and haven’t for a very long time. Yet they signed a 1 year contract in July and canceled it a month later for no other reason other than a “business decision”.

One can’t help but wonder if it’s just coincidence that Capital One is Virginia based company and also able to get away with “company” murder?

I don’t understand how lending a hugely profitable and cash rich company $3.56 billion help our financial crisis when they turn around less than a month later and spend a huge chunk of it to buy another company that will most likely result in more job loss and certainly no job creation. The $3.56 billion cash infusion did not encourage them to start lending again what so ever. In fact, it accomplished just the opposite by giving them even more power to abuse.

Additionally, on December 17, 2008 NJ, Governor Jon S. Corzine signed legislation creating the New Jersey Main Street Business Assistance Program, the latest in a series of initiatives established under his Economic Assistance and Recovery Plan to help the citizens and businesses of the Garden State weather the national economic downturn. The program was designed to enable qualified small and mid-size firms and nonprofit organizations in New Jersey to access capital by providing State support for bank lending through loan participations and credit enhancements.

Developed in partnership with the departments of Banking and Insurance and Treasury and the state’s banking community, the Main Street Business Assistance Program will be funded by a $50-million State appropriation and administered by the New Jersey Economic Development Authority (EDA).

As soon as I read the news I called my representative at NJEDA to reiterate my need for help. As I learned from my conversations with them 3 months ago, loans still need to originate and be approved at one of the EDA’s 13 preferred lending institutions. Wouldn’t you know Capital One is a preferred lender? When I attempted to reach out to some of the preferred lenders, including Capital One, I was told the same thing I heard three months ago, “right now they aren’t doing anything”.

Capital One’s wrongful termination of our CSA should be enforced and they should be held liable for the damages they have caused. At the very least, someone should stop them from wrongfully and arbitrarily ending other creditworthy borrower relationships, while allowing Capital One’s CEO, Richard Fairbanks and his crew to walk away with hundreds of millions.
According to Fortune 500’s annual ranking for 2008, Capital One Financial is the seventh largest commercial bank in the U.S. and the 130th largest overall U.S. Corporation. (that was before their latest acquisition) A bank of that size, with the help of a $3.56 billion dollar infusion from the government, could do a lot of good. Unfortunately, no good has come of it.

One can’t help but wonder, what’s in Richard Fairbanks Wallet? Your family’s money? It seems Richard Fairbanks and his “army” thinks they can take what they want, when they want, from whomever they want without consequence. Maybe that’s why Fairbanks has been in the top 5 the highest compensated CEO’s for the last 5 years earning over half of a BILLION DOLLARS!!!
I believe in “free markets” too which is why I went in business for myself. However, unlike Capital One, I honor my commitments and obligations. Does earning a multi-million dollar a year paycheck require taking advantage of the very people that helped get you there just because you can?

Having said that, I am smart enough to know I don’t stand a chance against them in court, and I sincerely hope someone else’s intervention might. In the mean time, I stand defenseless against Capital One’s soldiers as their lies and games force me to default and ruin my reputation and credit (780 fico).

I have spent the last 6.5 years building….working day and night and day….sacrificing valuable time that could have been spent with my wife and son. I will not rollover and let them hurt others without, at least, attempting to seek justice.